Balancing wholesale and direct-to-consumer sales is a tricky, but manageable, business, according to IRCE speaker Matt Grimm, of RST Brands.

All’s well that ends well for RST Brands, a manufacturer of patio furniture that sells wholesale to major retailers and also sells direct to consumers via the web.

18-20% of RST Brands’ sales are direct to consumer online, said Matt Grimm, director of e-commerce for RST, during the direct-to-consumer workshop at the 2017 Internet Retailer Conference and Exhibition in Chicago last week.

Online is a channel RST is keen to continue growing its retail sales, while also carefully managing the wholesale relationships it has with retailers like Costco Wholesale Corp., No. 9 in the Internet Retailer Top 500.

There have been some challenges along the way. For instance, a percent-off coupon promotion RST ran on Black Friday last year was supposed to exclude the products from the manufacturer’s Portofino patio line that Costco carries. A mistake with the coupon code let the discount apply to those items. Come Monday morning, Grimm’s bosses called him into a meeting and the Costco product manager was on the phone. “I was in a tight spot,” Grimm said.

While Grimm was called to task for the mistake, he says the error opened the door for a deeper conversation about how the manufacturer and Costco could work together more effectively.

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“Retailers give you awareness you can’t get elsewhere,” Grimm said. He added that selling through bricks-and-mortar stores is especially important in the furniture category as many consumers want to see, touch, and sit in pieces before  they buy.

“You have to create a strategy that benefits both sides,” he said. For instance, RST worked with Costco to design a post-purchase email Costco would send to customers prior to delivery of a Portofino patio set. It told consumers what to expect upon delivery—it’s not unusual for a larger set to come in 29 boxes—and some pieces, like cushions, are packed beneath the frames. Costco customer service routinely took calls from customers who thought their cushions were missing.

The email explained in detail how the set was packaged and where to find everything. It also offered a “white glove” delivery option where the delivery staff would unbox and put together the set for the customer. 66% of consumers opened the email, and Grimm said it significantly reduced Costco’s customer service calls related to these items.

The email also encouraged purchasers to visit RST’s site to register their product warranty. In doing so, RST gained permission to market to them directly—making them RST’s customers as well as Costco’s. This resulted in 5,000 new leads for the brand, Grimm said. To boost its own direct-to-consumer business, RST markets smaller-ticket products that Costco doesn’t carry, such as patio set covers and protective sprays, to these customers. Measured year over year in February, sales of such products increased 137%, Grimm said.

The conversation between RST and Costco also led Costco to set up Portofino displays in 50 Costco stores across the United States. The test was later expanded to 400 stores. It showcases a popular 4-piece patio set, and consumers interested in buying it can text a SMS code featured on the display to receive a message that directs them to the Costco.com product page to check out. By having the products available in store to try before they buy has also reduced customer service inquiries for Costco, Grimm said.

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